Closing the Opportunity Gap in the United States

Are Americans primarily suffering from income inequality or lack of opportunity? At the 2019 Social Enterprise Leadership Forum, speakers diagnosed the problem and proposed solutions.

Professor Damon Phillips in a fireside chat with Joel Klein, former chancellor of the New York City Public School System and chief policy and strategy officer for Oscar Insurance.

By Sarah O’Brien

“I came here today because I wanted to be with people who want to change the world,” said Joel Klein, former chancellor of the New York City Public School System and chief policy and strategy officer for Oscar Insurance, to a room filled with educators, entrepreneurs, investors, and nonprofit professionals. “Here” was a recent conference hosted by Columbia Business School’s Tamer Center for Social Enterprise, which brought together leading scholars from across the country to examine how Americans are suffering from the interconnected problems of income inequality and lack of opportunity and to propose effective policy solutions for the future.

While presenters probed the depths of these issues from a wide variety of angles, all agreed that rising inequality and a growing opportunity gap represent a significant and increasingly urgent threat to the United States’ stability, the happiness of its citizens, and its leadership in the world. “Creating greater prosperity for all is a social imperative; it calls us to live our ideals as a nation,” said Glenn Hubbard, Dean Emeritus and Russell L. Carson Professor of Finance and Economics at the School, who set the stage for the day with his opening remarks on creating a policy agenda to develop human capital for the modern economy.

"Creating greater prosperity for all is a social imperative; it calls us to live our ideals as a nation."
— Glenn Hubbard, Dean Emeritus and Russell L. Carson Professor of Finance and Economics at Columbia Business School

Damon Phillips, the Lambert Family Professor of Social Enterprise and co-director of the Tamer Center for Social Enterprise, added, “The good news is that in the wake of the financial crisis and the 2016 election, people across the board are looking at these issues as never before. This is something we can all rally around — right, left, old, and young — with a sense of shared purpose.”

Inequality of Opportunity for All

Over the course of the day, a vivid picture emerged of the way America’s class divisions manifest from the earliest days of an individual’s life through their educational path and into employment. In her talk on the role of higher education in intergenerational income persistence, Deirdre Bloome, a professor of sociology at the University of Michigan, presented research showing that the economic circumstances into which an American is born represent a powerful predictor of their future education and earnings. For example, some fifty percent of Americans born into the bottom quintile will remain there as adults — a startling lack of intergenerational mobility that persists despite more young people attending college than ever before.

Indeed, much of the day’s discussion focused on the role of higher education as both a disrupter and perpetuator of inequality in the United States. Michael Hout, a professor of sociology at New York University, described the “inequality of opportunity” that is hardwired into our college admissions system, where what often looks like merit (e.g., athletics, extracurricular participation, high test scores) is actually an indication of economic advantage. Hout’s prescription? A more venture-capitalist approach. “We currently treat admissions as a reward for what’s already been done but we should be looking at potential, at what someone could contribute to the university while they are there and to the economy when they graduate.”

In perhaps the most provocative proposal of the conference, David Grusky, a sociology professor at Stanford University, advocated for a new kind of affirmative action in college admissions. “It’s easy for colleges to give full rides to students who get in from the lowest income brackets because so few of them do,” he explained. “I propose a more algorithmic approach that weighs student achievement, such as grades and test scores, adds potential success in earnings and graduate school, and then adjusts for family investment. This is an authentic way to create equal opportunity. The first university to implement this would become ‘America’s university.’”

[S]ome fifty percent of Americans born into the bottom quintile will remain there as adults — a startling lack of intergenerational mobility that persists despite more young people attending college than ever before.

Beyond access, many speakers said that more emphasis needs to be placed on ensuring that admitted students succeed in, and graduate from, the right college for them. Highlighting community colleges as better pathways to the workforce for many young people, Professor Hubbard called for far more robust federal investment in that sphere of higher education. “It is critical that these students receive the support they need to complete their programs so that they can move up the ladder.”

Who Moves up the Ladder?

On the workforce side, presenters identified several factors that have exacerbated inequality and made moving up America’s economic ladder increasingly more difficult in recent years. Tom DiPrete, a professor of sociology at Columbia, addressed skyrocketing executive compensation. Aided by a sometimes opaque system of peer benchmarking, CEOs now make an astonishing 325 times the income of the average worker. At the same time, as illustrated by Suresh Naidu, an international, public affairs, and economics professor at Columbia, the decline of labor unions has left many low-income workers without protections, particularly in Right-to-Work states. “Historically, unions have been critical in facilitating intergenerational mobility,” said Naidu. “Without them, the labor market is becoming increasingly hostile to low-income workers.”

Both DiPrete and Naidu said that closing the inequality pay gap calls not just for federal policy but a new commitment on the part of corporations and the individuals who lead them. Said DiPrete, “Certainly, if the tax rate was more progressive, then there would be less incentive to have such enormous pay. But norms are important too, and they would have stopped the ratcheting effect over the past several years and kept executive compensation in line with workers.”

No One-Size-Fits-All Solution

Income inequality and lack of opportunity are not uniquely American problems, and two conference speakers provided a comparative look at other national models. Miles Corak, an economics professor at the City University of New York, offered lessons learned from Canada, a country with similar values and outlook, but easier access to the middle class for low-income children than the United States.

"Women are bringing up the bottom rung but at the same time, they are not lowering the top. There is still much work to do."
—Janet Gornick, Professor of Political Science and Sociology in the Graduate Center at the City University of New York

Presenting a cross-national analysis of Latin American and Anglophone Countries, Janet Gornick, a political science and sociology professor at the City University of New York, examined the interplay between women’s earnings and income distribution. “Women’s income is very important to reducing inequality and poverty,” she said. “For example, the poverty rate in the United States is 15 percent. Without women’s earnings, it would grow to 22 percent. Women are bringing up the bottom rung but at the same time, they are not lowering the top. There is still much work to do.” Among Gornick’s recommendations were new family leave policies, child care, and adjusted work schedules to keep women from leaving the workforce.

According to Shigehiro Oishi, a visiting professor of psychology at Columbia, America’s past may provide the most compelling road map for its future. Examining the link between income inequality and the pursuit of happiness — one of our nation’s founding ideals — Oishi said, “When income inequality grows, the average American feels life is unfair, trust in others diminishes, and even physical health declines. These findings are particularly vivid with those in the lowest income bracket.” When did Americans report themselves to be the happiest? During the 1970s, one of the most progressive tax eras in recent history.

From a class-based college admissions algorithm and investments in community colleges to executive compensation regulations and new family and childcare policies, there is much work to be done to offer substantive prescriptions to alleviate income inequality and create more prosperity for more Americans today and in the future.

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